by Ribbit Voice
Do you measure the Return on Investment (ROI) for your continuous improvement projects? Should you even try? This post explores my thoughts on this hotly debated topic.
whilst 85% of companies in their study were undertaking a form of process improvement, a surprising number had no measurable ROI to determine if it was working or not.
- Return – relies on prediction, its long-term and difficult to calculate
- Investment – involves much less prediction, its short-term and easier to calculate
Sometimes improvement activities are small, incremental events. Spending time trying to work out the exact ROI isn’t worth the effort, the time or the resource. Focus on the process and the financial results will follow.
What I think it boils down to a shift of focus from asking, “What’s the ROI on this project?” to, “What is the performance we need and how can we reach it?”
However, saying all this ROI IS an important metric, especially if you consider it in conjunction with other perhaps non-financial measures. For example factoring in the improvement to employee morale or a lower turnover rate which results from smaller kaizen events. I’d suggest involving Lean Accountants, people who understand real cost accounting; they will help you to break down the costs and benefits for any project.
How To Calculate Net Profit And Return on Investment:
What’s your opinion? Is ROI an essential pre-requisite before you kick off an improvement activity? Leave a comment below: